Afriat's theorem for general budget sets

Forges, Françoise; Minelli, Enrico

Forges, Françoise; Minelli, Enrico (2009), Afriat's theorem for general budget sets, Journal of Economic Theory, 144, 1, p. 135-145. http://dx.doi.org/10.1016/j.jet.2008.03.002

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Type

Article accepté pour publication ou publié

Date

2009

Journal name

Journal of Economic Theory

Volume

144

Number

Publisher

Academic Press

Pages

135-145

Abstract (EN)

Afriat proved the equivalence of a variant of the strong axiom of revealed preference and the existence of a solution to a set of linear inequalities. From this solution he constructed a utility function rationalizing the choices of a competitive consumer. We extend Afriat's theorem to a class of nonlinear, nonconvex budget sets. We thereby obtain testable implications of rational behavior for a wide class of economic environments, and a constructive method to derive individual preferences from observed choices. We also show that by increasing in a regular way the number of observed choices from our class of budget sets one can fully identify the underlying preference relation.

Subjects / Keywords

Revealed preferences; GARP; Rational choice; WARP; SARP

JEL

D11 - Consumer Economics: Theory
D43 - Oligopoly and Other Forms of Market Imperfection
C72 - Noncooperative Games